Employees and investors of Citigroup Inc. are suing the company over claims the company lied about its financial condition. Investors of two failed institutions are hoping to mitigate their losses in separate class actions, while two big issuers of mortgage-backed securities are fighting two new class actions.
A group of Citigroup employees filed a class action lawsuit against the financial holding company on March 24 in a southern California federal court, according to a statement from the firm of Dostart Clapp Gordon and Coveney.
Citi sold stock to employees to allow the employees to have a percentage of their salary in the form of restricted common stock, the complaint alleges. But the company made untrue statement of facts and omitted other material in the stock offering documents, including that loans and mortgage-securities were “impaired to a much larger extent than the company had disclosed.”
Citigroup’s stock is trading at under $3 a share. A year ago, it was at $27 and five years ago it was around $55 a share.
Citigroup shareholders have also filed a class action suit against the New York-based company in U.S. District Court for the Southern District of New York. According to the firm representing the class — Coughlin Stoia Geller Rudman and Robbins — the suit was filed March 13.
The complaint charges that Citigroup and others violated the federal Securities Act of 1933 by offering false and misleading statements in a Jan. 18 offering of 130 million shares of preferred stock at $25 a share. Citi is accused of not providing accurate information to shareholders about its loan portfolio and overall financial situation.
“‘Citigroup ultimately announced huge charges associated with its mortgage and credit-related asset portfolio, causing the price of Citigroup’s common stock and the preferred stock issued in the offering to decline,” lawyers said in a statement.
The Atlanta-based firm of Holzer Holzer & Fistel has launched an investigation and is considering action against Popular Inc. for possible violations of securities laws on behalf of buyers of Popular stock between Jan. 23, 2008, and Jan. 23 of 2009. The investigation focuses on if Popular “misrepresented” the quality of its mortgage-related loans and failed to disclose that it faced liquidity concerns and the prospect of cutting or eliminating its dividend.
Buyers of the 8.875% Trust Preferred Securities of Regions Financial Corp. can join class action suit filed April 1 by the Coughlin Stoia law firm. Regions is accused of breaking securities laws by offering false and misleading statements in an April 2008 sale of 13.8 million shares at $25 a share.
On Jan. 20 of this year, Region’s announced a 2008 fourth quarter loss of $9.01 per diluted share “largely driven by a $6 billion non-cash charge for impairment of goodwill,” according to company’s earnings statement. The disclosure drove the share price down “significantly.”
Washington Mutual investors, led by the Ontario Teachers’ Pension Plan, filed a federal class action suit in October that accuses the company of failing to disclose information that turned out to be harmful to shareholders. The former thrift failed in September 2008 and its assets were acquired by JPMorgan Chase & Co.
According to the complaint in 2006 and 2007 WaMu raised nearly $5 billion through four securities offerings. But lawyers and plaintiffs allege that each offering contained “materially false and misleading information”.
“The company’s misconduct began to come to light in late 2007, when in a series of disclosures Washington Mutual announced a shocking 72 percent decline in the company’s earnings and the need to set aside more than $2 billion additional funds to cover expected loan losses,” according to a statement from Bernstein Litowitz Berger and Grossman, the lead law firm in the lawsuit.
“Upon the disclosure of this news and other revelations about Washington Mutual’s improper lending practices that had been previously concealed, the company’s stock price and the value of the securities made pursuant to the company’s offerings plummeted, and Washington Mutual’s investors suffered billions of dollars of losses,” the lawyers claims.
A class action suit was filed by buyers of securities offered by Metropolitan Mortgage & Securities Co. In an April 2 statement, the law firm of Hagens Berman Sobol and Shapiro said investors have until June 1 to join the class. Met Mortgage — as the $2.5 billion company was known — filed for protection under Chapter 11 of the federal bankruptcy code on Feb. 4, 2004.
A proposed settlement between Countrywide Financial Corp. and the plaintiffs in an investor lawsuit was rejected by a Delaware judge because the agreement would improperly wipe out some investor claims, Bloomberg reported last week. Plaintiff SRM Global Fund claims it lost $80 million as a result of January 2008 statements by Ken Lewis — chairman and chief executive officer of Countrywide-parent Bank of America Corp. — dismissing Countrywide bankruptcy rumors and asserting the lender had a solid liquidity plan.
Mortgage securities investors are also getting their day in court.
A mortgage-related class action lawsuit against Morgan Stanley has been moved from a California to a federal court in New York. The case involves several mortgage pass-through certificates and was brought by a Mississippi public pension fund, according to an April 6 statement by the law firm of Bernstein Litowitz Berger and Grossman.
The lawyers say that in March 2006, Morgan Stanley filed a registration statement with the Securities and Exchange Commission “for the purpose of issuing billions of dollars” of pass-through certificates. But the bank-holding company allegedly made false and misleading statements and omitted other information about the certificates, including how the underlying loans were evaluated, appraised and collateralized.
Credit agencies eventually began to downgrade the certificates, making them “no longer marketable at prices near the price for them,” the plaintiffs contend.
And finally, pass-through certificates issued by Wells Fargo are also the subject of a class action suit filed in California on March 31 by Wolf Haldenstein Adler Freeman and Herz on behalf of buyers of several series of pass-through certificates. The city of Detroit is among the plaintiffs.
The complaint alleges that Wells Fargo “routinely disregarded the underwriting guidelines” in its own loan origination documents.CASE CITATIONS
Case filed by Citi employees,
Docket #3:09-cv-00606-L-AJB (U.S. District Court Southern District of California)
Case filed buyers of Citi 8.125% Non-Cumulative Preferred Stock, Series AA
(Southern District of New York.)
Case filed against Metropolitan Mortgage & Securities Co. by buyers of Metropolitan Investment Debentures, Series III and III-A; Metropolitan Preferred Stock, Series E-7; and Summit Investment Certificates, Series B and B-1.
Docket # CV-04-025-FVS (United States District Court for the Eastern District of Washington).
Case filed by buyers of Regions Financial Capital Trust III preferred securities.
Docket # 09-CV-03161. (U.S. District Court for the Southern District of New York).
Case filed by Mississippi Public Employees Retirement System and other buyers of Morgan Stanley certificates Mortgage Loan Trust 2006-4SL, Morgan Stanley Mortgage Loan Trust 2006-5AR, Morgan Stanley Mortgage Loan Trust 2006-5ARW, Morgan Stanley Mortgage Loan Trust 2006-6AR, Morgan Stanley Mortgage Loan Trust 2006-7, Morgan Stanley Mortgage Loan Trust 2006-8AR, Morgan Stanley Mortgage Loan Trust 2006-9AR, Morgan Stanley Mortgage Loan Trust 2006-10SL, Morgan Stanley Mortgage Loan Trust 2006-11, Morgan Stanley Mortgage Loan Trust 2006-12XS, Morgan Stanley Mortgage Loan Trust 2006-13AX, Morgan Stanley Mortgage Loan Trust 2006-14SL, Morgan Stanley Mortgage Loan Trust 2006-15XS, and Morgan Stanley Mortgage Loan Trust 2006-16AX.
Docket # 09-02137, April 6, 2009 (U.S. District Court for the Southern District of New York.)
Case filed by buyers of the WFMBS Pass-Through Certificates, Series 2006-AR18, 2006-17, 2006-15, 2006-16, 2006-AR19, 2006-18, 2006-20, 2006-19, 2007-1, 2007-PA1, 2007-2, 2007-AR3, 2007-4, 2007-3, 2007-5, 2007-6, 2007-7, 2007-8, 2007-9, 2007-10, 2007-11, or 2007-12.
March 31, 2008 (U.S. District Court, Northern District of California)
Case filed against WAMU on behalf of Ontario Teachers’ Pension Board and other buyers of the company’s securities.
Docket # 07-CV-09801, Oct. 21, 2008 (U.S. District Court for the Southern District of New York).
